Some Economists Argue That a Rise in the Interest Rate,brought

question 132

Multiple Choice

Some economists argue that a rise in the interest rate,brought about by a rise in government borrowing in the loanable funds market to finance the deficit,brings in foreign funds in search of the higher interest rate return.This,in turn,dampens the rise in the interest rate.If this is true as far as it goes,there will be __________ crowding out than there would be if foreign funds did not flow into the country.

• A) more
• B) less
• C) the same amount of
• D) none of the above

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Definitions:

Spot Rate

The present cost at which a specific asset like a commodity, currency, or security is available for purchase or sale with immediate delivery.

Net Present Value

A financial metric that calculates the value of a project or investment by discounting future cash flows back to their present value to assess profitability and risk.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, usually measured over a year.

Spot Rate

The current market price used for immediate delivery of a financial instrument or commodity.